Earnings Preview: J&J to report 3Q results Tuesday

TRENTON, N.J. (AP) -- Johnson & Johnson, which reports third-quarter results before the stock market opens Tuesday, likely will focus on experimental drugs under review by regulators and sales of its newest products.

WHAT TO WATCH FOR: The world's largest maker of health care products likely will tout its August acquisition of Aragon Pharmaceuticals, which is developing drugs for hormonally driven cancers, and its pipeline of experimental drugs. A key one, simeprivir for the fast-growing hepatitis C market, faces review on Oct. 24 by advisers to the Food and Drug Administration.

Analysts will scrutinize sales of J&J's newer products, particularly Invokana, its first medicine in the multibillion-dollar diabetes care market. The first drug in a new class of treatments that boosts sugar excretion via urine, Invokana got U.S. approval on March 29.

Meanwhile, consumers are wondering when the New Brunswick, N.J., company will finally resolve the manufacturing deficiencies that have caused about four dozen product recalls over the past four years. That's hurt sales, particularly for nonprescription medicines such as Tylenol and Benadryl.

The latest recalls include two in September: about 200,000 bottles of Motrin infant drops contaminated with tiny plastic particles and about 5,000 vials of injected schizophrenia treatment Risperdal Consta due to mold contamination. The recalls have become less frequent since new CEO Alex Gorsky took over in April 2012, but the company is still working on manufacturing upgrades under increased FDA scrutiny and some products remain off store shelves.

During the last quarter, J&J won approval for a few new uses for existing drugs. Infused immune disorder treatment Simponi Aria got U.S. approval for moderate-to-severe rheumatoid arthritis. In Europe, Velcade, for treating the blood cancer multiple myeloma, was approved as a starter treatment in those patients before they receive a transplant of stem cells. It had been limited mostly to patients who've failed other treatments.

Also, psoriasis drug Stelara got approval in the U.S. and Europe for treating adults with psoriatic arthritis, which causes joint pain, stiffness and swelling in patients with psoriasis.

WHY IT MATTERS: Along with the generic competition to medicines that once brought in billions a year, Johnson & Johnson and other drugmakers have been hurt by the global recession, rising drug development costs and unfavorable currency exchange rates.

With medicine sales leveling off in big markets such as the U.S. and Europe, drugmakers have focused on growing sales in emerging markets such as China and India. But sales there haven't been growing as fast as the industry had hoped. And in August a Chinese court ordered J&J to pay $85,000 in damages for setting minimum prices its distributors could charge for its sutures.

Analyst Steve Brozak of WBB Securities says J&J and other drugmakers may use the federal government shutdown as an excuse for sales and other problems — and possibly another round of layoffs.

But most investors probably will focus on the positive: After stagnating for a couple of years, J&J's share price has climbed from about $65 to $87 over the last 16 months.

WHAT'S EXPECTED: Analysts polled by FactSet, on average, expect earnings per share of $1.32 and sales of $17.43 billion.

LAST YEAR'S QUARTER: J&J reported net income of $2.97 billion, or $1.05 per share, on sales of $17.05 billion.

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Follow Linda A. Johnson at http://twitter.com/LindaJ_onPharma